E. Commitment and Contingencies
A review of Amazon Form 10 K published in January 2020 and Nike form 10 K posted in May 2019 shows how the two companies provide notes to the public and comply with FASB requirements. According to the annual reports, the companies disclose contingencies and commitments differently. Nike records its commitments and contingencies under note 18. It has two categories of contingencies in its notes. The annual report documents the amounts including projections to the end of 2024. The first deals with contingent payment to endorsers which are based on the best estimate. Other contingencies relate to legal proceedings on employment and contractual relationships, trademark rights, product ‘liability claims and other issues. The company assesses the probability of a loss and estimates the value (Nike, 2019).
The contingencies include remote which are future commitments amounting to $3,732 for operating lease and $373 for capital lease till the end of 2024 and not appearing in the financial statements but only at the notes. The company also has probable contingencies which are shown in the financial statements under different categories like rent expenses of $829, $820 and $731 for 2019, 2018 and 2017 respectively (Nike, 2019). Amazon records its commitment and contingencies in note 7. It identifies financial leases, obligations, among others amounting to $146,101 by the end of 2024. The said amounts are remote contingencies (Amazon, 2020).
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Amazon has probable contingencies recorded on the income statements and highlighted further under different headings in the notes. The total amount includes pledged assets, suppliers, other contingencies and legal proceedings (Amazon, 2020). Both companies comply with the requirements for FASB codification. They meet the requirements for presentation, identification of significant transactions including subsections, financial statements accounts and industries. The commitment and contingencies correlate with the requirements of FASB.
G. Cash Flow Statement
The primary source of cash for Nike is net income. According to the cash flow statement, the company recorded $4,029 as net income in 2019. Another sources are sale and maturity of short term investment contributing a total $3,787, disposal of PP&E, stock options and stock issuance. Investments in the previous year include the purchase of short term investments, PP&E and other investing activities (Nike, 2019). Amazon highest contributors of cash flows include sale and maturity of marketable securities $9,677, net income $3,033, unearned revenues, sale of PP&E and incentives. The company’s investments include the purchase of PP&E, acquisitions, and purchase of marketable securities (Amazon, 2020).
Amazon and Nike had financing activities also vary. Nike, for example, repaid some of its notes, debts and capital leases and other obligations. Similarly, it paid dividends, repurchased common stock and paid taxes. Amazon reported proceeds from long term debt, repaid some of its debt and finance leases and other obligations. According to the notes, the total estimated value of cash, cash equivalents, restricted cash and marketable securities amounted to $55,021 which is a significant increase from 2018 figure of $41,250 (Amazon, 2020).
The consolidate statement of cash flows reconciliation shows that Amazon recorded $32,173 in 2018 and $36,410 in 2019 which is an improvement (Amazon, 2020). Nike does not give more details on its cash flows on the notes and only describes cash and equivalents. According to the financial statements, Amazon is compliant with FASB codification since it shows all the details in the notes to the financial report, unlike Nike, which has missing information on the same.
References
Amazon. (2020). Amazon.com, Inc. Form 10-K . Ir.aboutamazon.com. Retrieved 26 March 2020, from https://ir.aboutamazon.com/static-files/63a014ac-bd47-42ce-b548-022a90d96e9a.
Nike. (2019). Nike Inc. Annual Report on Form 10-K . Sec.gov. Retrieved 26 March 2020, from https://www.sec.gov/Archives/edgar/data/320187/000032018719000051/nke-531201910k.htm.
